Indocement CDM Project
Presentation World Bank Office
Jakarta 12th August 2008
Oivind Hoidalen – PT Indocement Tunggal Prakarsa Tbk.
Structure of presentation
• Indocement and CDM Projects
• CDM and Preparation of Methodologies
• Alternative Fuel Project
• Blended Cement Project
• CDM Cycle
• Milestones – Indocement CDM Projects
• Expected CO2 reductions
• Host country approval
• Environmental, Economical, Social and Technological
Sustainability
• Final comments
Indocement and CDM projects
• HeidelbergCement AG – majority shareholder of Indocement
and member of World Business Council for Sustainable
Cement Production – committed to sustainable cement
industry centering on three pillars  economic growth,
ecological balance and social progress
• Cement industry worldwide contributes about 5% of
anthropogenic greenhouse gases  challenges as well as
opportunities
• CO2-trading  European emission trading scheme and CDM
mechanisms for non-Annex I countries of importance since
HeidelbergCement operates cement plants in several
developing countries
Indocement and CDM projects
•Tarjun ~ 2,5 mill tons/year
•Citeureup ~ 10 mill tons/year
•Cirebon ~ 2,5 mill tons/year
Indocement and CDM projects
•
•
Cement is produced by burning a mixture of raw
materials comprising mainly of limestone and clay in
large rotary kilns at temperatures above 1450 C. This
process results in the formation of clinker which
together with gypsum and other materials upon grinding
to high fineness is transformed into cement.
CO2-emissions are generated as follows
• Through Raw Meal Calcination
• CaCO3 = CaO + CO2
• Fuel burning since the Carbon in fossil Fuels will
generate CO2
• CO2 generated from Power Consumption – either
from the grid or from on-site Power Generation
• On-site transportation, lighting etc.
Indocement and CDM projects
• Indocement’s Energy efficiency
• About 3.150 kJ/kg clinker
• About 105 kwh/ton cement
• Main potential for CO2-reduction measures at
Indocement
• Increased use of alternative materials (Reducing Clinker
content in Cement through introduction of Blended
Cements) by using Limestone, Fly-ash and natural
Pozzolana (Trass)
• Increased use of alternative Fuels by using rice husk,
palm oil kernels, saw dust etc.
• Initial estimations indicated that reductions of about
0,5 - 1 million tons of CO2 could be reduced annually
through increased use of alternative materials and
alternative fuels – hence a considerable potential!
Indocement and CDM projects
• Based on an overall assessment of risks and benefits,
it was from beginning of the Project concluded to
proceed with the World Bank (Prototype Carbon Fund
– PCF) acting both as a Project Developer/Consultant
as well as being a buyer of a part of the CO2-reductions
• Reputation of the World Bank
• Due to the comprehensive documentation required,
Indocement appointed URS (Dames and Moore), later
changed to PT Solusi headed by Ibu Architrandi
Priambodo
What is CDM?
•
CDM Projects require that a so called Baseline be
established which defines
•
“ … the scenario that reasonably represents the
anthropogenic emissions by sources of Greenhouse Gases
that would occur in the absence of the proposed project
activity … ”
•
Barriers have to be overcome with the help of the
generated CER credits. It must be demonstrated that the
CDM Project is not “Business as usual”
•
As a consequence detailed and comprehensive
requirements are to be met in order to safeguard that
emission reductions from CDM projects are real,
measurable and long-term and that they are additional to
any that would have occurred without the project
•
The project proponent requires to follow certain Baseline
Methodologies which need to be approved by the
Methodology Panel reporting to the Executive Board
Preparation of Methodologies
• Following the modalities and procedures for CDM
Projects established at COP-7 in Marrakech in 2003, in
principle three Baseline Methodologies can be used
• Existing actual or historical emissions, as applicable –
(Market Barrier Approach – Blended Cement)
• Emissions from a technology that represents an
economically attractive course of action, taking into
account barriers to investment – (Investment Barrier
approach – Alternative Fuels)
• The average emissions of similar project activities
undertaken in the previous five years in similar social,
economic, environmental and technological
circumstances, and whose performance is among the
top 20 per cent of their category
Preparation of Methodologies
• Indocement Project a Pioneer Project and two new
Methodologies had to be developed
• Methodology – Blended Cement
• Baseline Methodology for barrier testing,
baseline scenario and emission reduction
calculation for project activities that substitute
Ordinary Portland Cement (OPC) with blended
cement
• Methodology – Alternative Fuel
• Baseline methodology for project activities that
substitute fossil fuels with alternative fuels in
cement kilns
Alternative Fuel Project
•
•
•
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Indonesia possesses large amounts of biomass fuels
such as palm kernel shells, rice husk and saw dust –
since such fuels are considered CO2 neutral - CO2
reductions are achieved
Extensive discussions took place in Europe and the US
during the 1980/1990ies as to the burning of alternative
fuels – in particular concerns about emissions of
persistent organic constituents such as dioxins and
furans
Extensive stack measurements in cement kilns all over
the world have confirmed that cement kilns are well
suited to burn a wide range of alternative fuels in addition
to biomass (car tires, oily sludge, plastics, paper,
pretreated municipal wastes etc.)
The use of some wastes will in addition to reducing CO2
also reduce generation of Methane from landfills –
thereby further reduce greenhouse gases
Blended Cement Project
•
•
•
•
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A major breakthrough for wider use of Blended
Cement – new European Cement Standard EN-197
introduced since end of the 1990ies
Standard allowed introduction of a variety of
“blended materials” under strict quality requirements
– thus assuring constructive properties of concrete
not to be jeopardized
Composition of Blended Cements deviates from
Ordinary Portland Cement OPC.
“Blended materials” are “Pozzolanic materials”, high
quality limestone etc.
“Pozzolanic materials” are siliceous or siliconaluminous materials reacting with cement to form
strength developing compounds
Blended Cement Project
•
The addition of “blended materials” to Ordinary Portland
Cement (OPC) is limited by the Indonesian cement standard.
•
In order to implement the CDM project for Blended Cement,
Indocement had to introduce a new Indonesian Cement
Standard allowing a wider use of blended materials  New
Indonesian Cement Standard (SNI-15-7064-2004) for Portland
Composite Cement (PCC)
•
PCC has compressive strength and other constructive
properties equivalent to that of OPC
CDM Cycle
Milestones – Indocement CDM Projects (1)
•
•
•
•
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Project Idea Note (PIN) with Letter of Acceptance from the
Ministry of Environment sent to the Prototype Carbon
Fund (PCF) of the World Bank  Dec 2002
Project Concept Note (PCN) sent to the PCF  Mar 2003
Letter of Intent (LoI) signed with the PCF  Aug 2003
Feasibility Study and Environmental Management Plans
(EMP’s) for each production site Citeureup, Cirebon and
Tarjun prepared  end of 2003
Project Design Document (PDD) jointly prepared by
Indocement and the PCF including proposal for new
Methodologies for Alternative Fuel Project and Blended
Cement Project sent to the UNFCCC  23 Jan 2004
Indocement (and PCF) initially expected to receive final
approval of both project components by May/June 2004
Milestones – Indocement CDM Projects (2)
•
Indocement’s proposed methodologies required however
several rounds of discussions with the Methodology Panel
(MethPanel making recommendations to the Executive
Board on how to calculate and monitor CO2 emission
reductions)
•
In the meantime Indocement and the PCF signed an
Emission Reduction Purchase agreement (ERPA) at the
Carbon Expo in Cologne  9 Jun 2004
•
Kyoto Protocol entered into force`  February 2005
•
Methodology for Blended Cement Project approved by the
MethPanel  October 2005 – a revised final consolidated
version approved  19th May 2006
•
Methodology for Alternative Fuel Project approved by the
MethPanel  June 2005 – a revised final consolidated
version approved  28th July 2006
Milestones – Indocement CDM Projects (3)
•
Validation process by DnV (Norway)  Dec 2005 to Jul
2006
•
Alternative Fuel project registered by UNFCCC  27 Sep
2006
•
Blended Cement Project registered by UNFCCC  28
Oct 2006
•
Verification by TUEV SUED (Germany)  Dec 2006 until
beginning of 2008
•
First CER’s finally approved on the 15th March 2008 for
the Alternative Fuel Project
•
CER’s for the Blended Cement project under final
revision and final approval expected soon
•
You have to be patient – entire process has taken > 5
years
CO2 reductions from biomass fuels and
production of Blended Cement
CO2
SOx
NOx
=
Fuels,
Calcination,
Power
Clinker
(100%)
Clinker
CO2
SOx
NOx
Alterna
tive
Fuels
Gyp
sum
+
Addi
tive
Alterna
tive
Materi
al s
Fuels,
Calcination,
Power
Clinker
Gyp
sum
+
Addi
tive
Summary of expected CO2 reductions
Host Country Approval
• Indonesia ratified the Kyoto protocol in July 2004
• Indonesian Designated National Authority (DNA) established
July 2005
• Application with answers to a set of questions sent to the
Indonesian National Authority – DNA  Sep 2005
• DNA approval  Dec 2005
• CDM projects must be approved by the DNA and must
in addition to reducing CO2 emissions meet specific
requirements from the host country
• The Indonesian DNA set up a set of criteria's with which
Indocement had to comply prior to acceptance by the
host country
• The following slides show some of these criteria's
L. Environmental Sustainability
•
L.1. Criteria: Environmental Sustainability
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L.1.1. Indicator
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L.1.2. Indicator
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Applicable national and local standards threshold
values for environmental quality must not be
exceeded (applies to air, water and soil
contamination)
L.1.3. Indicator
•
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Environmental Sustainability by applying natural
resource usage , conservation and diversification
Biodiversity (genetic, species and ecosystem) must
be maintained and genetic contamination shall not
occur
L.1.4. Indicator
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Compliance with land use and spatial lay-out
regulations
L. Environmental Sustainability
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L.2. Criteria: Local community, safety and health
•
L.2.1. Indicator
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L.2.2. Indicator
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Provide evidence that project activity will not give
any adverse effects on health for local communities
Occupational Health and Safety regulations to be
adhered to.
L.2.3. Indicator
•
Available documented procedures describing
adequate efforts in order to prevent the occurrence
of accidents as well as its remedial measures
E. Economical Sustainability
•
E.1. Criteria: Local community welfare – safety and
health
•
E.1.1. Indicator
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•
E.1.2. Indicator
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Describe efforts to handle potential impacts of
reduced income for a parts of the community
E.1.3. Indicator
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Project must not lead to any reduction in the
income of the local community as a whole
In case of lay-offs as a result of the project activity,
lay-offs must follow applicable statutory regulations
E.1.4. Indicator
•
Project must not lead to any reductions in the
quality of services to local community
S. Social Sustainability
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S.1. Criteria: Community Participation
•
S.1.1. Indicator
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S.1.2. Indicator
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Have in place a response and follow up to
comments and complaints from local communities
S.1.3. Indicator
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Have in place a consultation process for local
communities
Project shall not impair the social integrity of
community
S.1.4. Indicator
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Project must not lead to any conflicts among local
communities
T. Technological Sustainability
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T.1. Criteria: Technology Transfer
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T.1.1. Indicator
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T.1.2. Indicator
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The project activity must not create dependence
from foreign countries in terms of knowledge and
know-how.
The project shall not apply obsolete technology
T.1.3. Indicator
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Project shall improve the ability of and utilization of
local technology
Final comments
• A CDM Project must not only reduce CO2-emissions but must also lead
to Sustainable Development in the Host Country
• Comprehensive documentation and transparency required  PDD,
Validation reports, Verification reports on the UNFCCC-web for public
comments http://cdm.unfccc.int/
• Environmental Management Plans on Indocement web-site
www.indocement.co.id
• Challenging in a plausible way to predict investments, market
developments etc. (Time Frame 10 years and more!)
• Additionality – Why is a project only feasible with CO2-credits and not
feasible without CO2-credits
• Arduous Validation and Verification processes
• Provide substantiation for Methodology applicability
• Provide substantiation for additionality
• Detailed Monitoring reports to follow Monitoring plan in PDD
• Detailed leakage calculations (Although less than 5% of Emission
Reductions)
• Continuation of flexible mechanisms now being discussed as part of
“Post Kyoto Agreement” – Uncertain outcome!
Thank you